Smart Grid: Challenges and Opportunities

During recessionary conditions such as the recent global downturn, emphasis on cost cutting becomes dominant.

Energy efficiency is perhaps the most important aspect to be discussed in all forums as a customary way to cost-cutting. Realizing energy efficiency will be a tough task without the deployment of Smart Grid technologies.

The grid has transformed from a centralized generation and control system, and at present incorporates centralized renewables (wind and solar). In the near future, the grid will include residential and commercial generation, and in the long run, it will be highly distributed with a high penetration of renewable sources that exhibit variable generation and non-dispatch-ability. Smart Grid can do more and it will be the driver of many businesses in the future, offering more opportunities than challenges.

Clean technologies can ensure the success of Smart Grid. Investment in clean technologies reached $243 billion in 2010 as compared with $186.5 billion spent in 2009, according to Bloomberg New Energy Finance. These investments include investments in renewable energy, smart grid equipment, and energy efficiency, among others. Industry experts feels that these ‘deployments’ are on the right track.

China is planning to spend $100 billion on smart grids and another whopping $600 billion on electric grids in the next 10 years as part of its vision to overhaul power infrastructure. China has tied up with GE to focus on smart grid-enabled initiatives, including standardization of EV charging technologies, grid scale energy storage integration, distributed resources, micro-grids and more.

The vehicle-to-grid market is likely to reach $2.25 billion in 2012 and $40.4 billion in 2020, according to GlobalData. The exponential growth will be triggered by deployment of smart grid, among others. Government stimulus, smart grid and EV deployments in the U.S., China and Japan will drive the vehicle-to-grid growth globally. Developing a viable vehicle-to-grid infrastructure depends on the speed and cost of smart grid implementations.

Telecom service providers see smart grid as an opportunity to grab revenue streams using their wireless data networks. Service providers will have an opportunity to manage the data collection process from customer meters on behalf of the utility. Telecom service providers like AT&T, for example, can earn one dollar per meter per month for such an offering. This approach will reduce the upfront investment a utility would have to make to support a smart grid deployment.

Creating awareness about this kind of service will be a key challenge for any operator. A utility’s communications needs will increase during a power outage. At the same time, customers will also be using services to reach their families or friends. For this, additional bandwidth is required. Without offering a guaranteed bandwidth to the utility, the system will not work.

Home area networks are an essential part of the smart grid. The main challenge is that the home area network must automate those processes. For this, telecom service providers may expand their home networking role to include home energy management, enabling consumers to monitor various devices in the home, perhaps in parallel with home security management and home automation.

According to Pike Research, smart grid service provider revenues will increase to nearly $6 billion in 2016 from $2 billion in 2009. There are several alliances in the offing. AT&T has partnered with Current Group, a smart grid sensor and software vendor, to integrate Current’s technology with AT&T’s network management and wireless network management connectivity. AT&T is also partnering with Texas-New Mexico Power Company to offer wireless network connectivity for the latter’s $123 million smart grid project.

Verizon also has a partnership with Current Group and has smart grid-related alliances with meter manufacturer Itron and Ambient Corporation, which offers a product that extends Verizon Wireless connectivity to end user devices via Wi-Fi, powerline carrier, Zigbee or WiMax. Challenges are plenty for smart grid companies. To support the goal of smarter energy management, it will be critical for utility companies to upgrade their infrastructure to support two-way communication with customers. In the past few years, the definition of Smart Grid was centered on utilities involved in power generation and distribution. In the future, smart grid will be associated with more utility services.

A great deal of talk may not necessarily assist smart grid vendors. The industry needs strong strategies to support future demands. Industry is looking to create virtual power plants, for example, and such exciting projects are underway to support this model today, with integrators standing ready to ramp it up.

Home network connecting power utilities will be the largest opportunity for smart grid industry. Some telecom operators already supply utilities with wireless and wired connectivity to substations. It could be a natural fit for telecom operators to offer upgraded connections to those and other elements of the power distribution network. For instance, AT&T offers home networking capabilities in association with its U-verse multi-play offering, and Verizon has done the same with FiOS.

But some utilities may opt to use a single network to upgrade their connectivity and for communication with customers. Telecom service providers may or may not play a role there. If power utilities and operators cannot work together, it will be a big loss for telecom investors and customers. In some countries, both power and telecoms are owned by governments. In some places, the same groups are into offering both these services. Smart grids will ensure more cost effective services to customers, and it will become an essential tool to ensure more productivity in the future.